Gross-Income Test: What It Means and How It Works
The gross-income test is one of the criteria used to determine whether someone can be claimed as a dependent for U.S. federal tax purposes. It limits how much income a potential dependent may earn in a year in order to qualify as a dependent (typically as a qualifying relative).
Who the test applies to
- Primarily affects qualifying relatives. Qualifying children are subject to a different set of rules (including age and residency tests) and generally are not evaluated under this same gross-income threshold.
- The gross-income test is relevant for dependents who are over 19, or over 24 if they are full-time students.
- There is no age limit for someone to be a qualifying relative.
Annual threshold
- The gross-income limit is indexed for inflation and can change from year to year.
- Example: the limit was $4,300 in 2021. Always check the current IRS figure before applying the test.
What counts as gross income
Gross income includes most money and non–tax-exempt property and services received. Common examples:
* Wages, salaries, tips
* Taxable Social Security benefits
* Taxable unemployment compensation
* Taxable scholarships and certain fellowship grants
* Business income calculated as total net sales minus cost of goods sold, plus miscellaneous business income
* Gross rental receipts
* A partner’s share of gross partnership income (but not a share of net profits)
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Common exclusions and special rules
- Legally obligated child support received by a child is not counted toward the gross-income test.
- Certain household situations, such as households with an elder or disabled member, may be subject to different rules or exceptions.
- Meeting the gross-income test is necessary but not sufficient—other dependency tests (relationship, residency, support, joint return rules, etc.) must also be satisfied to claim someone as a dependent.
Effect on the dependent’s return
If someone is properly claimed as a dependent, they generally cannot claim a personal exemption on their own tax return for that same tax year.
Key takeaways
- The gross-income test restricts the amount a qualifying relative can earn and still be claimed as a dependent.
- The dollar limit changes periodically, so confirm the current threshold.
- Accurately determine which types of income are included or excluded, and remember that passing this test does not alone establish dependency—other IRS tests must also be met.